Sugar
business
For sugar production in 2021, Rusagro processed 4.6 mn tonnes of sugar beet, with 75% of this volume grown on the Company’s fields.

Overviewof the Russian sugar market in 2021

Though sugar production in the 2021/2022 season showed a slight recovery (+8%, or +348 ths tonnes) from a five-year record low of 5.0 mn tonnes in the 2020/2021 season, the domestic market in 2021 was still under pressure. As a result, exports slowed down visibly (−62%, or −755 ths tonnes) and the market prices revived.

 2%
5.6 mn tonnes
sugar production in Russia
 1.4 p.p
15%
  Rusagro's share in sugar production in Russia
 62%
454 ths tonnes
sugar exports from Russia
 12%
158 ths tonnes
sugar imports to Russia

Production

According to the Union of Russian Sugar Producers (Soyuzrossakhar), sugar production for 2021 calendar year fell marginally (−2%), reaching 5.6 mn tonnes. The 1H production (in the 2020/2021 season) amounted to 0.4 mn tonnes, and the 2H production (in the 2021/2022 season) – to 5.2 mn tonnes. About 0.3 mn tonnes more could be produced in 2022 before the end of the 2021/2022 season.

The sugar output decline is attributable to decline of sugar content of sugar beet to 17.3% (−2 p.p.) in 2021/2022 season, with concurrent increase in beet processing volumes amid better crop results. Thus, in 2021 the plants processed 37.7 mn tonnes of beet (+7% in 2020), and in the 2021/2022 season they processed 39.0 mn tonnes, which is 25% more than in the previous season.

With annual sugar consumption at 5.8–6.0 mn tonnes in Russia, domestic demand during the reporting period was covered by the 2020-end high carry-overs (5.3 mn tonnes).

Sugar production in Russia for the calendar year mn tonnes
SUGAR PRODUCTION VOLUME FOR THE SEASON mn tonnes
VOLUME OF SUGAR BEET PROCESSED FOR THE CALENDAR YEAR mn tonnes
VOLUME OF SUGAR BEET PROCESSED FOR THE SEASON mn tonnes

Comment: sugar output data include sugar produced from molasses.

Source: Soyuzrossahar

Key players

By the end of 2021, five companies accounted for 68% of Russia's sugar production. Prodimex leads the market with a 19% share (–1.6 p.p.). With a 15% share (+1.4 p.p.), Rusagro ranks third. The variance in companies' share of total sugar output in the reporting period is explained by the different size of the sugar beet harvested in the regions where the companies' sugar plants operate.

 1.4 p.p
15%
Rusagro's share in sugar production in Russia in 2021

Comment: sugar output data include sugar produced from molasses.

Source: Soyuzrossahar

Exports and imports

In 2021, white sugar exports from Russia fell by 62% (down 755 ths tonnes) and amounted to 454 ths tonnes. Reduced domestic sugar output drove down supplies to near-abroad countries, in particular year-on-year exports to CIS countries dropped by 65% (down 594 ths tonnes). Supplies to far-abroad countries totalled 2 ths tonnes (down 84 ths tonnes), returning to pre-2020 levels.

Belarus, which has traditionally been the largest supplier, ramped down the sugar production and thus their imports of white sugar to Russia continued the downward trend for the third consecutive year. In 2021, this figure dropped by 12% year-on-year and reached 158 ths tonnes.

Exports and imports of white sugar ths tonnes

Source: railway traffic data and the Federal Customs Service data

Sugar export breakdown by destination in 2021 %

Prices

The year-average price of sugar in Krasnodar in 2021 amounted to 39.9 RUB/kg, excl. VAT. The positive price trend is due to the poor sugar beet harvest in the last two seasons after a record high harvest in the 2019/2020 season, which led to prices falling to their lowest level in 10 years. The recovery in market prices were also influenced by the dollar and rising global prices – Sugar#11 contact prices are up 39% according to the ICE.

State tariff regulation

A price cap on retail sugar was in effect from 20 December 2020 to 1 October 2021 to protect Russian consumers. Thus, sugar producers agreed to keep ex-works sugar price (for 50-kg bag) not higher than 36 RUB/kg incl. VAT and retailers — to keep retail price not higher than 46 RUB/kg incl. VAT.

Average sugar prices in Russia based on the price index in Krasnodar RUB/kg excl. VAT

Source: Institute for Agricultural Market Studies (IKAR)

Results of Rusagro’s Sugar Business in 2021

ADJUSTED EBITDA RUB bn
9.0
‘21
6.4
‘20
4.0
‘19
4.9
‘18
5.5
‘17

Rising sugar market prices in 2021 pushed the revenues of Rusagro’s Sugar Segment up by 29%, which totalled RUB 36.4 bn (up RUB 8.2 bn). Coupled with a 2 p.p. improvement in EBITDA margin, this led to a 41% increase in adjusted EBITDA (up RUB 2.6 bn) – up to RUB 9.0 bn.

Operating results

No.3
 
sugar producer in Russia
 4%
791 ths tonnes
sugar output volume
 5%
769 ths tonnes
sugar sales volumes

Financial results

 29%
36.4 RUB bn
revenues
 41%
9.0 RUB bn
adjusted EBITDA
 2 p.p.
25%  
adjusted EBITDA margin

Assets overview

Sugar plants

In 2021, maximum sugar beets processing capacity of Rusagro’s plants remained flat with the previous year — 53,850 tonnes of beets per day. The maximum production capacity of the Company during the season time (from August to July) is about 900 ths tonnes of beet sugar, excluding sugar from molassesThe estimate of Rusagro’s maximum sugar output is based on a beet processing capacity of 53,850 tonnes per day, 115 plants’ working days and a sugar yield of 14.5%. The number of working days and sugar yield can vary with a number of parameters, including the market supply of beets and their sugar content level..

Rusagro’s sugar beet processing plants produce two main by-products – pulp and molasses. The plants pelletise the pulp and sell it to third parties, while the molasses is used for additional sugar production and betaine production. The Company operates two desugarisation facilities at the Znamensky and Chernyansky sugar plants, with a total processing capacity of 310 ths tonnes of molasses per season. This enables the Company to produce an additional 120 ths tonnes of sugar and 30 ths tonnes of betaine per year, making Rusagro one of the world leaders in the production of this amino acid.

Capacity of Rusagro’s sugar processing plants ths tonnes/day
~1.0 mn tonnes
Rusagro's sugar production capacity, including sugar from molasses

CEREAL PRODUCTION

The Company's assets include JSC Gerkules cereal plant, a grain-processing facility with its own packaging line. The plant produces buckwheat and crushed buckwheat for the B2B channel and packaged buckwheat and rice for the B2C channel.


Beet sugar production
Extract sugar production
Production of cereals
Marketing and sales

Rusagro’s Sugar Business is represented by nine sugar plants located in the Tambov, Belgorod, Kursk, and Orel Regions in close proximity to the sugar beet cultivation areas of the Company’s Agriculture Business. In the Tambov Region, the Company runs the Znamensky, Nikiforovsky and Zherdevsky sugar plants, in the Belgorod Region – Chernyansky, Nika and Valuysky plants, in the Kursk Region – Krivetsky and Kshensky plants, in the Orel Region – Otradinsky plant.

9 sugar plants
2 desugarisation facilities
Capacity of Rusagro’s sugar plants by regions in 2021, %

Brands

The Company’s product portfolio includes five sugar brands of different price brackets: Russkii Sakhar, Chaikofsky, Brauni, Mon Café and Khoroshiy, as well as the Tyoplye Traditsii brand. Over years, the Company lead the way in the consumer sugar market, and the Russkii Sakhar, Chaikofsky, Brauni and Mon Cafe brands hold the first positions in their relevant segments. The Company’s sugar brands are also the most sought-after brands among Russian consumers – Russkii Sakhar and Chaikofsky brands enjoy consistently high recognition and loyalty.

Brands
Brands
Brands
Brands
Brands
Brands

Investments

Due to the lack of new capital-intensive projects in 2021, Rusagro’s investments in development and maintenance of the Sugar Business posted the negative growth (down 33% year-on-year) and amounted to RUB 1.0 bn. About half (45%) of the investments in the reporting period were allocated to maintain the existing facilities of the Sugar Business – automation, replacement of equipment, reconstruction of production facilities and augmentation of the operational reliability. The development projects included final works on the desugarisation station in the Belgorod Region and expansion of pulp granulation capacities.

RUSAGRO'S INVESTMENT IN THE SUGAR BUSINESS RUB bn
 33%
1.0 RUB bn
Rusagro's investments in the Sugar Business in 2021

AUTOMATION AND INNOVATION

The strategic goal of Rusagro's Sugar Business is to reduce sugar losses in all sugar beet production cycles, and Industry 4.0's best practices and solutions – from physical devices to bio-engineering solutions – are being used to achieve this goal. The most active work is focused in three key areas, which include raw material management, production, and storage and logistics of products.


Procurement of raw materials
Automated beet procurement and plant logistics management system

Reducing losses and higher accuracy of sugar beet residue management

2021
2022
Sugar production
Sugar production monitoring system with elements of artificial intelligence (AI)

Unbiased production data and reduced losses in sugar beet processing

2019
2021
Storage and logistics
Automation of outgoing inventory and introduction of a transportation management system (TMS) based on unique mathematical algorithms

Reduced cost of sales delivery by devising optimal routes

2022
Product innovations

In addition to technology-related projects, Rusagro's Sugar Business is exploring innovative products as alternatives to traditional sugar. In 2021, for example, the Company decided to launch long-term projects in 2022 to produce a new generation of zero-glycaemic index sweeteners to replace fructose and synthetic sweeteners in diabetic and dietary products, and to produce sweet proteins from micro-organisms for use in various food industries.

Operating results

Production

The beet processing volume in 2021 totalled 4.6 mn tonnes (+13%) and in the 2021/2022 season – 4.7 mn tonnes (+27%). Similar to the last year, 75% of the beets were purchased from Rusagro’s Agriculture Business. In the reporting season, the plants worked for 74 to 131 days (74 to 100 days in the 2020/2021 season), from 1 September 2020 to 16 January 2021. The average sugar content of beets at a time of reception was 19.0% (not including sugar recovered from molasses), down 1 p.p. against the previous season figure.

For the last year, Rusagro produced 791 ths tonnes of sugar, +4% year-on-year (up 27 ths tonnes). This figure includes 84 ths tonnes (−20%) of sugar that was recovered from molasses processed of beets harvested in the 2020/2021 season, and 12 ths tonnes of sugar from sugar beets from tolling arrangements. The total sugar output in the 2021/2022 season was 733 ths tonnes, +18% season-on-season (up 31 ths tonnes), excluding molasses sugar.

Rusagro’s sugar production ths tonnes
 4%
791 ths tonnes
Rusagro’s sugar production in 2021

Sales

In 2021, sugar sales amounted to 769 ths tonnes, down 5% year-on-year (down 43 ths tonnes). The negative growth was caused by lower sugar carry-overs at the end of 2020 due to cut-back in sugar production as compared to 2019. In addition to sugar, we sold 180 ths tonnes of pulp (−24%), 25 ths tonnes of betaine (−7%) and 11 ths tonnes of cereals (−40%). The sales of pulp and betaine were driven down by the decline in beet processing volume in the 2020/2021 season. In the reporting year, around 76% of all products sold were in the B2B segment and 24% — in the B2C segment.

Sales volumes of key products from Rusagro's sugar plants ths tonnes
 5%
769 ths tonnes
Rusagro’s sugar sales in 2021

Consumer segment

In 2021, 30% of sugar sales (+8 p.p.) fall on the consumer segment. Sugar sales of the own branded products amounted to 146 ths tonnes, 4% below the 2020 level. During the reporting period, Russkii Sakhar and Chaikofsky brands retained theire leading positions in the Russian white cube sugar market, while Brauni led the way in the brown cube sugar market.

According to AC Nielsen’s survey for November 2021, the combined market share of Rusagro’s four sugar brands – Russkii Sakhar, Chaikofsky, Mon Cafe and Khoroshiy – was 48% (+2 p.p.) on the cube white sugar market: Russkii Sakhar gained 33% market share (+1 p.p.) and Chaikofsky – 14% (+3 p.p.). Brauni accounted for 28% (−1 p.p.) of the brown cube sugar market in Russia.

According to Tiburon data, in 2021 Russkii Sakhar and Chaikofsky brands again showed a high level of brand recognition – for Russkii Sakhar it was 86%, for Chaikofsky – it stood at 61%.

 2 p.p.
48%
share of Rusagro’s brands on the white cube sugar market In 2021

Exports

In 2021, Rusagro exported 202 ths tonnes of products, down 21% year-on-year. The key export product for the Sugar Business in terms of volume of supplies is pulp; its exports in the reporting period totalled 167 ths tonnes (−18%). The top pulp purchasers were Ireland (51 ths tonnes, +283% year-on-year), Norway (24 ths tonnes, −20%), and China (23 ths tonnes, −45%). Exports of betaine amounted to 23 ths tonnes (−15%), including 9 ths tonnes (+79%) destined for Belgium. Due to insignificant growth in Russian sugar output in 2021, sugar exports almost halved in that period (−48%) and reached 12 ths tonnes.

Exports of Rusagro’s Sugar Business ths tonnes
 21%
202
ths tonnes exports of Rusagro’s Sugar Business in 2021

Financial results

In 2021, Rusagro’s Sugar Segment revenues rose by 29% to RUB 36.4 bn (up RUB 8.2 bn), despite declining sales volumes (−5%) on the back of lower sugar production in the 2020/2021 season. As some of the sugar sold in the reporting period was produced in the previous season with a lower production cost, the growth rate of sugar sales revenue was higher than the growth of sugar beet procurement costs. This resulted in an increase in adjusted EBITDA margin by 2 p.p. to 25% and in adjusted EBITDA by 41% to RUB 9.0 bn (up RUB 2.6 bn).

Revenues of Rusagro’s Sugar Business RUB bn
Adjusted EBITDA of Rusagro’s Sugar Business RUB bn
 29%
36.4 RUB bn
REVENUES OF RUSAGRO’S SUGAR BUSINESS IN 2021
 41%
9.0 RUB bn
ADJUSTED EBITDA OF RUSAGRO’S SUGAR BUSINESS IN 2021
 2 p.p.
25%
ADJUSTED EBITDA MARGIN OF RUSAGRO’S SUGAR BUSINESS